Older Retirement Ages and More Social Security Changes Coming in 2018

Social Security will look a bit different in 2018. Every year, Americans eagerly await the announcement outlining the various changes being made to what many consider the most important social program in the country. Will your benefits increase? What about the strict guidelines tethered to the program? Will they be modified in a way that affects your ability to get by? These are all questions 46 million of America’s seniors and 66 million overall worry about every fall.

The Social Security Administration released its adjustment reports for 2018. Here is what you need to know about the changes being made to Social Security in 2018 and how they’re probably going to affect you.

1. You’ll (sort of) get a raise

With the release of the January 2018 Cost of Living Adjustment, Americans can now stop wondering what will happen to their monthly payouts. This year, seniors will receive a 2% increase in COLAs, which amounts to about $27 per month more on average. Singles will receive an average of $1,404, and couples who are both receiving payments will receive $2,340, a full $46 more monthly. The maximum possible Social Security benefit for those who begin collecting benefits at full retirement age will also increase to $2,788 in 2018.

What this means for you

In 2017, Americans saw benefits increase by just 0.03%, so this increase is a welcome change of pace for those living on a fixed income. The COLA hasn’t been this high for six years. But don’t break out the champagne and credit cards just yet. Most Americans won’t notice any difference in their monthly checks, as the increase in Medicare Part B premiums automatically deducted from your benefits will likely offset any boost.

A higher tax cap hits wealthier Americans

Workers are required to pay a 12.4% payroll tax into Social Security, but your employer usually picks up 50% of the tab. This means most Americans will pay 6.2% of their earned income to Social Security until their income exceeds $127,200. In 2018, however, this cap rises $1,500 to $128,700, meaning wealthier individuals should expect to fork over an extra $93 in tax at minimum next year. However, those who earn more than the taxable maximum will not have those earnings taxed.

What this means for you

The Social Security Administration predicts roughly 12 million people will pay higher taxes beginning January 1, 2018, as a result of this change. At first glance, this may anger those who are affected by the jump, but when you look at the bigger picture, it’s much more reasonable. Last year, the wage base increased a whopping $8,700, or roughly $540 more per month.

Changes in the wage base are determined by the national wage growth. Because 2016 saw no change, the 2017 adjustment accounted for two years of growth. That was not the case this year.

An older retirement age

Something unique about the 2018 Social Security changes is that the full retirement age will rise. Everyone born between 1943 and 1954 must wait until they are 66 to receive 100% of their monthly benefit. Full retirement age for those born in 1956 is now 66 and 4 months. This is a two-month increase from 2017, when the full retirement age for people born in 1955 ticked up to 66 and 2 months.

What this means for you

You can sign up for Social Security at age 62, but you’ll receive a reduced payout. It’s not until you reach your designated full retirement age that you’ll get your full benefit. This means older workers affected by this change will have less time to boost payments via delayed claiming.

“There are fewer months between the ages of 67 and 70 to earn delayed retirement credits, meaning the maximum benefit is lower with a full retirement age of 67 versus 66,” William Meyer, founder and managing principal of Social Security Solutions, tells US News.

The earnings limit is going up, too

While there’s no law prohibiting you from working and receiving benefits simultaneously, there is an earnings limit for people who retire before their full retirement age. Fortunately, this limit will increase in 2018. Next year, the limit will rise to $17,040, up $120 more than in 2017. The earnings limit expands by $480 to $45,360 for those who reach full retirement age in 2018.

What this means for you

Working during retirement is a wise choice, but even with larger earnings limits, you’re still at risk of penalty should you exceed the ceiling. If you earn too much, Social Security will withhold $1 for every $2 earned above the limit. The penalty decreases for those at full retirement age to

Additional security for Social Security

Not all Social Security changes are meant to be stressful. In fact, some might even be considered relieving. 2018 is bringing additional security features to the Social Security website. Account holders will notice two-factor authentication to access personal information. Although this began in May 2017, users must now enter a one-time code, in addition to a username and password, to log in online.

April 2018 will also mark the debut of new Medicare cards without Social Security numbers printed on them. New Medicare cards will contain a complex combination of letters and numbers to better protect your personal information.

What this means for you

The effort to beef up cybersecurity may be met with opposition from seniors who disapprove of technology’s widespread integration, but recent data breaches and cyber hacks threatening millions of Americans’ private information make these changes necessary.

“The goal of the initiative to remove Social Security numbers from Medicare cards is to help prevent fraud, combat identify theft, and safeguard taxpayer dollars,” said CMS Administrator Seema Verma to CMS.gov.

Social Security is going digital

The SSA announced in a blog post they will officially terminate paper statements to everyone under age 60 in 2017. “We know that our cutbacks will affect many of you, but we have no choice. We will continue to serve you and work for you as best we can.”

Like most things these days, getting your earnings history via the mail is a thing of the past. If you want to check your earnings history, you must create an online my Social Security account. You’ll be able to check your Social Security status at any time via this portal only.

What this means for you

The SSA predicted its decision to mail fewer paper statements would cut costs by $11.3 million in 2017, so the need to mail even less in 2018 is likely another attempt to save money.

People who receive Social Security Disability Insurance benefits will be able to report wages online through these new services as well. It’s a convenience that eliminates the need for SSDI beneficiaries to visit a field office to report their wages in person, as they can now print an earnings receipt at home online.

More adjustments to disability thresholds

Social Security isn’t just for retirees. Nearly 14 million people qualify for monthly disability payments from the SSA. Those who receive disability income from Social Security are also in line to see a rise in monthly earnings. Estimated average Social Security benefits payable in 2018 for all disabled workers will increase from $1,173 to $1,197. People who are legally blind will earn $20 more in 2018, up to $1,970. Non-blind people will see their maximum threshold increase by $10 per month to $1,180.

What this means for you

2018 looks to be a year where improvements are made to the disability program overall. Social Security hosted a National Disability forum in November 2017 to acquire input on inclusion to the List of Compassionate Allowances and Rare Diseases. As stated in the newsletter, “Experts in the field of rare diseases will share their research and suggestions for Compassionate Allowances conditions. Patient organizations will share extensive information on conditions and recommend conditions for inclusion to the List of Compassionate Allowances.”

Social Security will also continue what’s known as a trial work period for those who’d like to try their hand returning to the workforce. The trial period allows the beneficiary to collect benefits and earnings at the same time.

What you can do to prepare

Trying to effectively manage yearly changes to Social Security could easily add a few gray hairs to your head. But the same downside to such uncertainty is also the silver lining. The only thing that’s constant is change itself, so once you learn to expect such modifications, you can plan for them appropriately.

Obviously, an emergency fund will help offset any substantial Social Security cost increases year over year. But those who effectively budget for their retirement years and beyond should have little issue taking these changes in stride. Crunch your numbers realistically before committing to a full retirement to determine your necessary monthly expenses. Then, figure a way to live slightly below your means so you can build a reasonable savings account throughout your later years. This could be achieved by working a part-time job for supplemental income, downsizing your home and accompanying living expenses, or increasing your retirement contributionsduring your highest-earning income years to pad your savings for future use.